Wednesday, March 13, 2013

Zara: Vertical Integration at it's Current Finest

There was a news story this morning on NPR about Fashion Retailer Zara. Here's a piece from the story:

"Ortega built the world's biggest fashion company in a rainy, impoverished corner of northwest Spain — Galicia — where the 76-year-old has lived since he was a kid.

The son of a railway worker, Ortega went to work in a local shirt maker's shop at age 14 to help feed his family. Jose Martinez was Ortega's first colleague. He's 77 now and still works at that same shop called Gala.

"He may be the third-richest man in the world, but for me, he's just a good guy," Martinez says. "He came to work in my father's shop in 1951, so we became friends, Amancio and me."

More than 60 years later, Gala employees still sew shirts upstairs from where they're sold. That's a model Ortega took with him when he opened his first Zara store two blocks from Gala in 1975.

As the company grew, he kept production close to home — in Spain and Portugal — at a time when other chains were moving factories to Asia for cheap labor."

What we at Detroit Wallpaper Co. enjoy so much about the success of Ortega's company, Zara, is it's business management model titled "Vertical Integration". Simply put, vertically integrated companies are those that control several or all phases of their own product or service's supply chain. This means that Zara conceives, produces and distributes it's own product. There are a lot of great benefits to doing this. It keeps cost down, and shortens lead time on development significantly, allowing a company to respond to demand in a much quicker fashion than companies that have to rely on other companies to produce or distribute their product.

Kevin assembling our pattern books by hand.

Although we obviously are very different in nature from Zara, we use this same model. Our art department, production team, and main distribution hub all sits under one roof. We take our product from conception all the way to it's delivery by hand. Doing so not only affords us the ability to make a product as effectively and efficiently as possible, but it allows us to make changes and to develop new ideas much faster than if we had to rely on another team to help us through the process.

For more information on Zara and it's founder, Ortega check out the NPR story here.

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